Harris v. Beasley , 123 Tenn. 605 ( 1910 )

Mr. Justice Neil

delivered the opinion of the Court.

The hill was filed, alleging judgment, execution, and nulla Iona return against W. D. Beasley; that he was the owner of certain real estate of the value of $2500 or $3000; that this real estate was encumbered with a trust deed in favor of the other defendants for a debt of about $1500, showing a surplus in value more than sufficient to pay complainant’s debt; and asking that the trust •deed be foreclosed by sale of the property, to the end that a sufficiency of the surplus be applied to the payment of complainant’s debt. There was an order pro confesso against the principal defendant, W. D. Beasley, and the other defendants answered, admitting the allegations of the bill as to the trust deed and the value of the property, and therefore, necessarily, the surplus value available for complainant’s debt. Tbe defense was that said other defendants had purchased the real estate from W. D. Beasley on the morning of December 29,- 1909, without any notice of the filing of complainant’s bill, or of the rights claimed by him. The bill, however, was filed on December 28, 1909, and process was on that day served on W. D. Beasley.

The right of a judgment creditor to reach the equity of his debtor in real estate in the manner attempted in the present proceeding is one well recognized in this State, and the filing of the bill describing the property and stating a case for this form of relief fastens a lien upon the property. This is established by statute and numerous decisions. Shannon’s Code, sections 6091, 6095; Fulghum v. Cotton, 6 Lea, 590; Schultz v. Black-ford, 9 Lea, 434; Wessel v. Brown, 10 Lea, 685; Bridges v. Cooper, 98 Tenn., 381, 384, 392, 39 S. W., 720; Porter v. Duke, 99 Tenn., 24, 27, 41 S. W., 361; McClurg v. McSpadden, 101 Tenn., 433, 435, 436, 47 S. W., 698.

Schultz v. Blackford, supra, and Bridges v. Cooper, supra, are leading cases. In the first of these, not only is a lien declared to exist, but the right of the trustee under the mortgage to sell after the filing of the bill is denied, even though no injunction be ordered. In that case it appeared that the chancellor mistakenly supposed the trustee had a right to sell notwithstanding the filing of the bill by the creditor, and that he had to delay the final disposition of the cause until such sale should be made, and the surplus, if any, should be paid into court by the trustee. When the sale was made, the property .was bid in by interested parties at a sacrifice. This court set aside the trustee’s sale and remanded the cause to another sale, the latter to be made under the direction of the chancery court. In Bridges v. Cooper, supra, the lien Avas established in unequivocal terms. It appeared in that case that after the creditor had filed his bill the owner of the property covered by the trust deed obtained from the trust creditor a release of the trust debt on payment of a part thereof and his agreement to turn over to the trust creditor certain purchase-money notes upon a certain sale contemplated. This subsequent sale was made, and the notes transferred accordingly. The court held that by the filing of the bill the judgment creditor, having execution and nulla bona return, obtained a lien upon the property, and that the subsequent dealings of the maker of the trust deed and the trust creditor, relieving the property of the trust debt, simply enlarged the judgment creditor’s lien, and did not by any means impair the right to satisfaction he had acquired by the filing of the bill.

In Porter v. Duke, supra, without referring to or noticing the prior cases, it was held that a judgment creditor, who sought to foreclose a chattel mortgage of his debtor and subject the surplus, without impounding the property or obtaining a receiver or injunction, could not obtain relief upon the mere showing that the property was sold, pending the litigation, at a private sale, as authorized by the mortgage, when no surplus was realized, and it was not shown that the sale was fraudulent, or that the property was sacrificed, or that it did not bring- its full value. This case evidently proceeded on the ground that no injury had been done by the sale, since it was not fraudulent, and the property was not sacrificed, and there was no surplus. It, however, narrowly escaped being in conflict with the well-considered case of Schultz v. Blackford. . While it is not necessary to overrule this case, we think it should be confined to its exact facts.

' In the case of McClurg v. McSpadden, supra, it appeared that a bill was filed by a judgment creditor with execution and nulla bona return, for the purpose of selling land which was incumbered by a trust deed, in order to reach the surplus. The bill also attacked the trust deed as fraudulent. The trust creditor answered, denying the fraud. A few days before this answer was. filed the complainant took a trust deed from his creditor on the same land, which instrument provided that, unless the judgment and costs of the complainant should be paid by the 15th of June, 1897 (which was nearly a year after the filing of the bill), the trustee should sell the property. It also provided that the cause should stand continued until that time, and, if payment should be made as provided, the cause should be dismissed, and, further, that if the property should be sold under the prior trust deed, then the complainant’s trust deed should be foreclosed at the same time, and the surplus, after satisfying the prior debts, should go to the complainant’s debt. The holder of the prior mortgage was no party to this second trust deed. He foreclosed his trust deed by a sale of the property a few months prior to the date fixed for the maturity of the second trust deed, at which sale W. R. Turner became the purchaser. Thereupon the complainants filed a supplemental bill, making the original trust creditor, Manard, and the purchaser, Turner, parties. This bill charged that. Manard agreed to postpone the sale under his trust deed until the maturity of the second trust deed, and that for this reason complainant had taken the second trust deed, and that the sale under the first trust, deed was made in violation of this agreement, and without notice to the complainants until too late to enjoin it.. The fact was not .proven, however, that any such agreement was made. It was charged that the land sold for an inadequate price; but this, likewise, was not proven. It appeared that the entire proceeds were necessary to the satisfaction of the debt of the first trust creditor and the expenses of the first trust deed. It was first held that the ground of relief based upon the charge of fraud was not made out. It was conceded that, as the creditor had a' judgment, execution, and nulla bona return, he acquired a lien upon the defendant’s equity in the real estate by the filing of his bill, and it was said that, if proof had been made of the judgment and return of nulla bona, the complainant might have impounded the surplus; but that in this case it appeared there was no surplus, if the sale should be allowed to stand; so that the question stated was whether Manard could proceed to execute his trust deed out of court under its provisions, instead of' under the orders of the court. It was held that he could, do so, and that this holding did not in any wise conflict with. Fulghum v. Cotton, supra, and Schultz v. Blackford, supra, “as the effort in these cases was to force a sale, and not to prevent it.”

The court added that inasmuch as it appeared that the complainant, for a valuable consideration, had bound himself to delay until June 15,1897, and that the defendant had not agreed to such delay, the latter could not be postponed until that time; also> that inasmuch as the last trust deed provided that, if the property should be sold under the first trust deed, it should then also be sold under the second; that this was a clear concession that Manard, the beneficiary under the first mortgage, might have a sale made under his trust deed, and that complainant was in that event to have the surplus. It was also said that the fact, that Manard was requested to postpone the sale, and that complainant offered, if he would do so, to pay his debt, was of no importance, since no tender was made, and that Manard was under no obligation to delay the sale or accept the promise.

On the grounds stated in the last paragraph we think the decision may be sustained; but it must be overruled so far as it holds that a sale may be made under the trust deed after the creditor has filed his. bill describing the property, and seeking to subject his debtor’s equity therein. This question was fully and carefully discussed and the true principles stated in Schultz v. Blackford. McClurg v. McSpadden is directly in conflict therewith. To hold that the trustee iua,y sell, notwithstanding the bill, and force upon the judgment creditor the necessity of filing a supplemental bill to reach any surplus that may arise from such sale, or, in case there is no apparent surplus, the burden of showing that the sale was not a fair one, or that the property did not bring its full value, is to make his remedy only a colorable one. When it was held in Fulghum v. Cotton, supra, that a judgment creditor of the maker of a trust deed had the right to bring before a court of chancery the debtor, the trustee, and the trust creditor, over the opposition of the latter, to the end that a sale might be made under the direction of the court, instead of. under the trust deed by the trustee, to reach the surplus, and when it was held, under that and subsequent cases, that the filing of the bill created a lien, there went with these adjudications the necessary legal implications that the court of chancery, being clothed with power to grant the relief, was likewise possessed of' all authority incidental thereto, proper and necessary to make the relief effectual, and a fortiori that no defendant to such bill would have the power to defeat the jurisdiction at his will, by taking the property from under the lien and disposing of it out of court. The suggestion of the existence of such right in a defendant, is itself an anomaly. It could arise logically only upon a denial of the lien. It would be idle to concede a lien to a judgment creditor by the filing of his bill, and leave it in the power of the trustee under the trust deed to defeat the lien by sale thereunder. It is no answer to say that the judgment creditor might enjoin the sale. If the trustee under the trust deed has the right to make the sale after the filing of the bill creating the lien, the court of chancery would have no right to enjoin him. It was held in the case of Schultz v. Blackford that the proper course of the beneficiary under the mortgage or trust deed, upon the filing of the bill by a judgment creditor, would be to file a bill in the nature of a cross bill in the same case, and have the sale made in court, and that out of the proceeds he would be entitled to his debts and costs before anything could be paid upon the debt of the creditor. By the filing of the cross bill he would be in a position to prevent undue delay and to secure his rights by prompt action of the court in case the original bill should be dismissed.

Under such a proceeding as the present there is no need of an attachment nor. of an injunction, though of course,' this may be found necessary in cases where personal property is involved, and its attachment is necessary to make effective the jurisdiction of the court, it being one of the general poivers of the court to issue such a writ; and sometimes an injunction may be necessary, or may be proper, for the same reason. But these writs are not necessary in any case to create the lien. That arises upon the filing of the bill describing the property, and setting forth the existence of a judgment and execution and nulla dona return, the incumbering mortgage or trust deed, its maturity, and that there will probably be a surplus upon sale made.

We are of the opinion, therefore, in the present case, without regard to any other question, that the complainant acquired the right to satisfaction out of the surplus or equity of defendant Beasley, and to have the sale made Tinder the orders of the court.

' In addition to tlie grounds of relief already set forth, it should he stated that the purchase of the trust property was not made pursuant to a sale under the trust deed, hut was a private sale made by the maker of the trust deed to the beneficiaries thereunder for a sum largely in excess of the trust debts. The case, therefore, falls directly within the authority of Bridges v. Cooper, supra.

Moreover, the sale by W. D. Beasley to his codefend-ants, after the filing of the bill against him, and the service of process on him, could in no event avail to remove the property from the operation of the- lien. The Us pendens became operative immediately upon the service of process, after the filing of the bill. Williams v. Williams, 11 Lea, 363; Wooldridge v. Boyd, 13 Lea, 151; Tharp v. Dunlap, 4 Heisk., 686; Staples v. White, 88 Tenn., 30, 12 S. W., 339; 25 Cyc., 1457. The lis,pendens became operative when service was effected on W. D. Beasley, which, as already stated, occurred on the 28th day of December, the day before the purchase was made from him by the other defendants. It was not essential, in order to create the lis pendens, that service should be made on the purchasers from Beasley, although they were parties to the suit. The object of the bill was to reach his interest in the property, not theirs. The bill sought to have their trust deed foreclosed, it is true, but to the end only that their money should be paid to them, in order to reach a surplus, the property of W. D. Beasiley, to be applied to his debt due complainant, and to the costs, so far as might be necessary for these purposes.

In what we have said upon the subject of lis pendens we do not wish to be understood as intimating that the operation of this doctrine is essential to the rights which accrued to complainant upon the filing of the bill. The lien then attached. We state the Us pendens doctrine merely as an. additional ground on which the rights of the complainant rest under the facts as disclosed in the record.

It results that the writ of certiorari must be, and is hereby, granted, and the cause is heard upon the record and briefs filed; whereupon we decide that a decree must be entered in this court, ascertaining the amount of complainant’s debt and interest, and declaring a lien on the land therefor, and granting defendants sixty days tO' pay the debt and costs into court, and, in default of such payment, directing a sale of the land for cash to pay it. There is no prayer for a sale on time, and without redemption. We give no directions for the payment of the trust debts, because these were settled by agreement of the parties to that instrument when W. D. Beasley made sale of the land to his codefendants.

A similar decree will be entered in the case of Crenshaw Bros. v. W. D. Beasley et al.